Taxes on the Working Class

Recently, I got into a Facebook comment exchange with a longtime friend of mine from back home in Providence, RI.­ He identifies as a conservative. I had posted an article that argued that a portion of the reason for the Republican Party gaining so many seats in Congress was that youth of color did not come out to vote in the same numbers as they did in 2008. This, I argued, was another factor supporting the argument that the election results did not signify a conservative shift in the American populace; rather, it reflected the disillusionment and anger of voters who felt that President Obama and the Democrats did not deliver on the progressive change they had voted for.

This topic warrants its own post, and I probably will dedicate one to it. We’ll see.

What I want to discuss here is a comment that he made about taxes and the size of the government. He decried the size of the government, and how they are becoming ever more invasive into our freedoms, mentioning as one example an excise and sales tax on alcohol. I don’t know much about the size or extent of the tax he was talking about; however, it made me think about all of the recent hoopla over whether or not we need to cut taxes, and about the larger role of the government in all of it.

My friend ain’t no millionaire (Sorry, that’s how we see it back home!). He comes from a working class family, and from 6thgrade to 12thgrade he went to the same publics schools I did. The point is, he is not benefiting from corporate tax breaks and cutting income taxes for the rich. Leaving the rest of his political beliefs aside, some of that concern is valid—it’s not merely right wing blabber. We are in an economic crisis, and we are being hit hard. For the latter, I don’t include everyone in society. That “we” is regular working class people. Higher taxes on things that affect our everyday life are going to unfairly burden us with the brunt of paying for state and federal deficits.

Now, let’s take a look at two of the recommendations of the National Commission on Fiscal Responsibility and Reform—a “bipartisan” panel appointed by the President and charged with the task of coming up with solutions to the nation’s long-run fiscal problems. They proposed eliminating the deductibility of health benefits and mortgage interest. These are tax breaks that Nobel Prize-winning economist, Paul Krugman, says, “whatever you think of them, matter a lot to middle-class Americans.” Krugman goes onto point out that the gained revenue will not be used to reduce the deficit, “but to allow sharp reductions in both the marginal tax rate and in the corporate tax rate.”

I take issue with the use of that term, “middle-class,” which most often just refers to “middle-income” working class people; however, the picture is clear. Here, Krugman is spot on again:

It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans. And what does any of this have to do with deficit reduction?

What we have is yet another example where working Americans has to bear the brunt of the economic crisis, while the wealthy consolidate their wealth. It is measures like these that give can validate the calls for “smaller government” and fuel anti-tax hysteria. It also, if implemented, will probably contribute to a weakening of the economy and an increase in the budget deficit because: 1) working class people will have less money to spend, thereby lowering demand; 2) the rich people are less-likely to put that newfound money into the economy; and 3) tax flows from the wealthy will diminish leading to a decrease in government revenue and probably increase long-term deficits.

The problem is that measures like these are pursued because the Democrats are not willing to do what is necessary—due to them being controlled by financial and corporate interests—and after the midterm elections, they do not have the ability to even if they wanted. Absent of increased taxes on the wealthiest 1-5% and a massive fiscal stimulus, the tab has to be picked up by us. Republicans are able take advantage of this fact—though once they also fail, or even make things worse, it could be a different story.

This is what people like my friend do not get. It is not a matter of “small government” or “big government”—do those preaching small government speak out against the massively funded military industrial complex or militarized borders? It is a matter of whose interests the government is serving; it is about political power. And the reality is that our economic system of capitalism relies on a strong government to rescue the elite that run it when they overplay their hand.

Until we can mount a counterforce to corporate interests controlling government by building a social and political movement, and eventually think beyond the limits of our current economic arrangement to imagine a system based on equitable cooperation and true freedom, working people will always be the hand that holds the silver spoon.